Correlation Between Mesa Air and ELDORADO

Can any of the company-specific risk be diversified away by investing in both Mesa Air and ELDORADO at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Mesa Air and ELDORADO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mesa Air Group and ELDORADO RESORTS INC, you can compare the effects of market volatilities on Mesa Air and ELDORADO and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Mesa Air with a short position of ELDORADO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and ELDORADO.

Diversification Opportunities for Mesa Air and ELDORADO

-0.36

Correlation Coefficient

Mesa Air  ELDORADO

Very good diversification

The 3 months correlation between Mesa and ELDORADO is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and ELDORADO RESORTS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELDORADO RESORTS INC and Mesa Air is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Mesa Air Group are associated (or correlated) with ELDORADO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELDORADO RESORTS INC has no effect on the direction of Mesa Air i.e., Mesa Air and ELDORADO go up and down completely randomly.

Pair Corralation between Mesa Air and ELDORADO

Given the investment horizon of 90 days Mesa Air is expected to generate 30.95 times less return on investment than ELDORADO. But when comparing it to its historical volatility, Mesa Air Group is 7.18 times less risky than ELDORADO. It trades about 0.01 of its potential returns per unit of risk. ELDORADO RESORTS INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,025  in ELDORADO RESORTS INC on October 14, 2024 and sell it today you would earn a total of  210.00  from holding ELDORADO RESORTS INC or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.57%
Values	Daily Returns

Mesa Air Group  vs.  ELDORADO RESORTS INC

Mesa Air Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Air sustained solid returns over the last few months and may actually be approaching a breakup point.

ELDORADO RESORTS INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ELDORADO RESORTS INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ELDORADO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and ELDORADO

The main advantage of trading using opposite Mesa Air and ELDORADO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air position performs unexpectedly, ELDORADO can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ELDORADO will offset losses from the drop in ELDORADO's long position.

The idea behind Mesa Air Group and ELDORADO RESORTS INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.